Ninth Circuit Substantially Reduces Punitive Award Against Walgreen

Things have been quiet in the world of punitive damages for the last few months, but two recent decisions substantially reducing punitive awards under the BMW/State Farm factors warrant mention. My colleague Miriam Nemetz will discuss one of them—Grant Thornton, LLP v. Yung—in a forthcoming post. In today’s post, I will address the Ninth Circuit’s decision in Mitri v. Walgreen Co.­—a case in which my colleague Michele Odorizzi and I represented the defendant.

The case involves the alleged wrongful termination of a pharmacist, Sami Mitri, who claimed to have been fired in retaliation for identifying improper billing practices. The jury found for Mitri, awarding him $88,000 in lost wages (Mitri found a new job as a pharmacist shortly after he was terminated) and nothing for his alleged emotional distress. However, the jury awarded Mitri $1,155,000 in punitive damages—approximately 13 times the compensatory award.

After an appeal, a remand, and another appeal, the Ninth Circuit found no error in the jury’s decision to award punitive damages, but concluded that the amount of the punitive award was unconstitutionally excessive and ordered a new trial unless Mitri agreed to a remittitur of the punitive damages to $352,000, representing a 4:1 ratio of punitive to compensatory damages.

In analyzing the BMW guideposts, the court first concluded that Walgreen’s conduct was “of low to intermediate reprehensibility.” It rejected Mitri’s contention that Walgreens disregarded the health and safety of its customers by terminating a competent pharmacist or supposedly engaging in improper billing practices aimed at public insurance programs (the district court specifically noted that there was no finding of any billing fraud).

The court also rejected Mitri’s contention that Walgreen engaged in “repeat misconduct” because Mitri had been disciplined before he was terminated. In so holding, the court implicitly accepted Walgreen’s argument that this reprehensibility factor is intended to single out recidivists, not multiple steps in a single course of conduct leading up to the plaintiff’s injury.

At the same time, the court held that, by terminating Mitri, Walgreen “arguably placed him in a financially vulnerable position.” That conclusion disregarded prior Ninth Circuit precedent holding that this reprehensibility factor is satisfied only when the defendant targeted individuals for exploitation because they were financially vulnerable. But this factor does not appear to have materially affected the court’s analysis of the reprehensibility guidepost.

With respect to BMW’s ratio guidepost, the court correctly recognized that a ratio of 13:1 is facially excessive. Notably, it rejected Mitri’s attempt to justify a double-digit ratio by characterizing the compensatory damages as “small.” Previous Ninth Circuit case law has limited that category to cases in which the compensatory damages are less than $50,000. The court then noted that, under the framework set forth in Planned Parenthood v. American Coalition of Life Activists, 422 F.3d 949 (9th Cir. 2005), a ratio of up to 4:1 is the most that is allowed when compensatory damages are significant and the conduct is not highly reprehensible.

Finally, the court indicated that the third BMW guidepost also suggests that the punitive award was excessive because the most comparable civil penalty is only $10,000.

Having determined that the punitive award was unconstitutionally excessive, the court ordered a remittitur of the punitive award to $352,000, a ratio of 4:1, which Mitri subsequently accepted.

Although unpublished, the decision in Mitri adds to the ever-growing body of case law holding that a 4:1 ratio is the constitutional maximum when the compensatory damages are neither small nor particularly high and the conduct is at the low to middle part of the reprehensibility spectrum.